Groupama // Universal Registration Document 2022

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FINANCIAL STATEMENTS Combined financial statements and notes

3.1 3.1.1

Interest rate risk Type of and exposure to interest rate risk

(d) Rate hedges Risk of rate increase

3.1.3 All over ‑ the ‑ counter transactions are secured by a “collateralisation” system with the Group’s top ‑ tier banking counterparties. Sensitivity to interest rate risk analysis Pursuant to IFRS 7, an analysis of accounting sensitivity was carried out at 31 December 2022 with a comparative period. This analysis applies to year ‑ end balance ‑ sheet postings that show accounting sensitivity to interest rate risk (underwriting non ‑ life and life liabilities, bond investments, financial debt in the form of bonds). It is different to analyses applying to embedded ‑ value prospective data. The impacts on Group’s IFRS equity and income are shown net of profit sharing and corporate tax. SENSITIVITY OF TECHNICAL INSURANCE LIABILITIES ANALYSIS Non ‑ life insurance Regarding non ‑ life underwriting liabilities, risk mapping allows the sensitivity of portfolios showing interest rate changes to be analysed, i.e. , portfolios of current annuities and temporary payments (individual life and health insurance, and third ‑ party liability insurance premiums). With the exception of increasing annuities and risk reserves for long ‑ term care risk, as non ‑ life insurance underwriting reserves are not discounted on the consolidated accounts, these amounts are therefore not sensitive to changes in interest rates. As 31 December 2022, the amount of the discount in the actuarial reserves for non ‑ life annuities, before reinsurance, was €263 million. The amount of the discount in the reserve for increasing risks on long ‑ term care, before reinsurance, was approximately €82 million. The result of the sensitivity to interest rates analyses shows that the Group is not particularly sensitive with regard to non ‑ life commitments as a whole. The impact of a change of +/-100 basis points, calculated net of tax, is shown in the following table: 3.1.3.1 (a) The purpose of the hedges that are implemented is to partially hedge the portfolios against the risk of interest rate increases. This is made possible by converting fixed ‑ rate bonds into variable ‑ rate bonds (“payer swaps”). The strategy consists of transforming a fixed ‑ rate bond into a variable rate, either on a security already held or new investments, and has the objective of limiting the capital loss recognised because of an increase in interest rates in case of partial liquidation of the bond portfolio for the payment of benefits. These strategies aim to limit the impact of potential redemptions.

3.1.2 Conversely, in the event of an increase in rates, the Group may have to face a rush of redemptions for these policies, which would lead to the sale of a portion of the bond portfolio under unfavourable market conditions. The consequences of changes in interest rates would also impact SCR/MCR hedging. Group risk management Several years ago, the Group implemented systematic studies on the exposure of the Group’s subsidiaries to market risks. Asset/Liability Management Asset/liability simulations permit an analysis of the behaviour of the liabilities in different interest ‑ rate environments, particularly the ability to meet the remuneration requirements for the policyholder. These simulations allow the Group to develop strategies designed to reduce the impact of contingencies on the financial markets on both the results and on the balance sheets. Interactions with redemption risk Redemption behaviours are sensitive to changes in interest rates: an increase in rates can lead to an increase in the policyholders’ expectation of revaluation and, if this expectation cannot be met, the sanction of early redemptions. In addition to the loss of income and an increase in payouts, the risk will be losses related to the disposal of assets at a loss (which could be the case for fixed ‑ rate bonds) in cash of insufficient cash. The objective of Asset/Liability Management is to optimise the policyholder’s satisfaction and the insurer’s risk using strategies that take into account the various reserves available (including cash) and bond management strategies coupled with hedging products. Interest rate risk related to the existence of gua ranteed rates The constraints of guaranteed minimum interest rates constitute a risk for the insurer if rates fall, as the yield on the assets may be insufficient in terms of these constraints. These risks are handled at the regulatory level through specific risks. (a) (b) (c) During a period of interest rate volatility, the Group’s financial margins might be affected. Specifically, a drop in interest rates would have a negative effect on the profitability of the investments. As such, during a period of low interest rates, the financial performance of the Group might be affected.

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Universal Registration Document 2022 - GROUPAMA ASSURANCES MUTUELLES